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31 March, 18:56

Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 110 units from beginning inventory and 240 units from the March 5 purchase; the March 29 sale consisted of 90 units from the March 18 purchase and 130 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to nearest whole dollar.)

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  1. 31 March, 19:26
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    See explanation

    Explanation:

    Requirement A - Specific Identification

    Income statement (Partial)

    Sales (350 units*$87.80) + (220 units*$97.80) = $52,246

    Less: Cost of goods sold

    Beginning (Mar. 1) = 110 units * $52.80 = $5,808

    Mar. 5 = 240 units * $57.80 = $13,872

    Mar. 18 = 90 units * $62.80 = $5,652

    Mar. 25 = 130 units * $64.80 = $8,424

    $33,756

    Gross Profit $18,490

    Requirement B - FIFO

    In each inventory method, sales remain same.

    Income statement (Partial)

    Sales (350 units*$87.80) + (220 units*$97.80) = $52,246

    Less: Cost of goods sold

    Beginning (Mar. 1) = 190 units * $52.80 = $10,032

    Mar. 5 = 270 units * $57.80 = $15,606

    Mar. 18 = 110 units * $62.80 = $ 6,908

    Total cost of goods sold $32,546

    Gross Profit $19,700

    Requirement C - LIFO

    Income statement (Partial)

    Sales (350 units*$87.80) + (220 units*$97.80) = $52,246

    Less: Cost of goods sold

    Mar. 5 = 200 units * $57.80 = $ 11,560

    Mar. 18 = 130 units * $62.80 = $ 8,164

    Mar. 25 = 240 units * $64.80 = $15,552

    Total cost of goods sold $35,276

    Gross Profit $16,970

    Requirement D - Weighted Average Method

    Income statement (Partial)

    Sales (350 units*$87.80) + (220 units*$97.80) = $52,246

    Less: Cost of goods sold (note - 1) = $ 33,189

    Gross Profit = $19,057

    Note - 1

    For first 350 units cost of goods sold

    Total units (beginning + March 5) = 190 units + 270 units = 460 units

    Total cost = $10,032 + $15,606 = $25,638

    Weighted average cost per unit = Total cost : Total units

    Weighted average cost per unit = $25,638 : 460 units = $55.74 (Rounded to two decimal places)

    350 units cost of goods sold = 350 * $55.74 = $19,509

    For the second 220 units cost of goods sold

    Remaining balance after 350 sold = 460 units - 350 units = 110 units

    And cost = $25,638 - $19,509 = $6,129

    Mar. 18 = Total units = 110 + 130 = 240 units

    Total costs = $6,129 + $8,164 = $14,293

    Weighted average cost = $14,293 : 240 untis = $59.55

    Mar. 25 = Total units = 240 + 240 = 480 units

    Total costs = $14,293 + $15,552 = $29,845

    Weighted average cost = $29,845 : 480 units = $62.18

    220 units cost of goods sold = 220 units * $62.18 = $13,680

    Total cost of goods sold for 350 + 220 = 570 units = $19,509 + 13,680 = $33,189
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